Logistics Beyond Transportation

Transcription

1 Presented by: David Stewart Vice President, ICF International Logistics Beyond Transportation 3 November Singapore ICF International icfi.com ICF

2 ICF International s Aviation advisory services include the following: M&A Commercial Due Diligence MRO Market Research & Analysis Aerospace Manufacturing Strategy Aviation Asset Valuations & Appraisals MRO Cost & Performance Benchmarking MRO Information Technology (IT) Assessment MRO Strategic Sourcing Support Supply Chain Management LEAN Continuous Process Improvement Military Aircraft Sustainment ICF International icfi.com ICF International

3 There s a new catalyst that is creating the opportunity to change the aftermarket supply chain 2,000 1,800 1,600 1,400 1,200 1, Aircraft deliveries (units) Mature Aircraft New Generation Aircraft Highlights New aircraft with higher reliability, lower manhours and complex technology change the business case for establishing MRO capability especially with greater airline focus on financial returns This is a catalyst to change the MRO supply model. Creating new opportunity for OEMs and aftermarket providers Source: ICF International ICF International icfi.com ICF

4 Typical MRO Cost Breakdown Materials drive about 50% of the annual $62B spend by airlines on MRO 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Engine Labour 20% Materials 80% Typical Aftermarket Cost Breakdown Components Labour 45% Materials 55% Airframe Labour 80% Materials 20% Line Labour 85% Materials 15% Insight The two material intense MRO activities - engines and components account for 62% of overall MRO spend A significant share of this material travels to the workshop Turntime and working capital costs remain critical drivers of competitiveness Source: ICF International ICF International icfi.com ICF

5 Growth of (asset intense) rotable pools is certain 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Component Support Buying Behaviour 9% 45% 30% Traditional Integrated* Integrated Component Programs Penetration /A350 ~20% 55%-70% Growth Drivers Small fleet size Perceived technology risk Improved ROIC Maintenance no longer core Predictable outgoings Attractive value propositions Lower investment, less infrastructure Ability and willingness to take on airlines inventory is now a commonplace requirement to win major component MRO contracts => availability of finance more important Source: ICF International ICF International icfi.com ICF

6 Aerospace and MRO continues to globalize with new clusters emerging in southern latitudes Global Aerospace Manufacturing Clusters Aerospace suppliers concentrated In North America and Europe Established Clusters Emerging Clusters Washington Southern California Mexico Central US Eastern Canada Connecticut Southeast US United Kingdom France Spain North Africa Germany Eastern Europe UAE Russia* India China Malaysia Japan Singapore Brazil and labor intensive activities are shifting South Source: ICF International * Note Russia is emerging for Western certificated equipment ICF International icfi.com ICF

7 Airlines have re-discovered profitability $USD Billions $40 $30 $20 Global Airline Profitability $29.3B $USD Billions $10 $5 Asia Pacific Airline Profitability $5.1B $10 $0 $0 -$10 -$5 -$20 -$30 -$10 Driven by NOT ONLY by improved capacity management and lower fuel, BUT ALSO Source: IATA Central Forecast Jun 2015 ICF International icfi.com ICF

8 by a sea-change in airline management philosophy to focus more on ROIC, as exemplified by Delta It s been about changing the mindset and the approach to the industry, and really treating the airline industry like any other industrial business. For that reason, we target 15% ROIC just like other high-quality industrial transports. Richard Anderson, CEO, Delta Airlines Inventory held (~$47B) and associated cost burden (~$10B) will drive greater management attention on effective logistics and parts mamagement ICF International icfi.com ICF

9 Thank you! For questions regarding this presentation, please contact: David Stewart Vice President Aerospace & MRO Advisory +44 (0) icfi.com/aviation ICF International